Masimo Corp Q2 FY2025 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to Masimo's Second Quarter 2025 Earnings Conference Call. The company's press release is available at www.masimo.com. I'm pleased to introduce Eli Kammerman, Masimo's Vice President of Business Development and Investor Relations. Please go ahead.

Thank you. Hello, everyone. Joining me today are CEO, Katie Szyman; and CFO, Micah Young. Before we begin, I would like to inform you that this call will contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our periodic filings with the SEC. Also, this call will include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP or adjusted financial measures. In addition to GAAP results, these non-GAAP financial measures are intended to provide additional information to enable investors to assess the company's operating results in the same way management assesses such results. It is important to note that the Sound United business is now being classified as held for sale and reported in discontinued operations. As a result, our non-GAAP financial measures have been updated to reflect the continuing operations of Masimo's Healthcare business for both current and historical reporting periods. Therefore, the financial measures we will be covering today will be primarily on a non-GAAP basis unless noted otherwise. Reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release, earnings presentation and supplementary financial information on our website. Investors should consider all of our statements today, together with our reports filed with the SEC, including our most recent Form 10-K and 10-Q in order to make informed investment decisions. I'll now pass the call to Katie Szyman.

Thank you, Eli, and good afternoon, everyone. In the second quarter, our core Healthcare business saw significant growth and earnings performance. We reported revenue of $370 million and earnings per share of $1.33, along with a 600 basis point increase in operating margin. This outstanding performance demonstrates the effectiveness of the cost structure initiatives implemented last year, and it is the outcome of diligent effort and strong execution across the organization. I have consistently highlighted the remarkable talent and innovation we possess at Masimo. Building on that foundation, we have thoughtfully expanded our leadership team in crucial areas. First, we appointed Greg Nihan as Chief Commercial Officer. Greg has over 25 years of experience in building and optimizing commercial organizations in the medical technology field, achieving double-digit growth and enhanced profit margins through high-performance teams. Second, we welcomed Dr. Kaman Wang as President for Japan and the Asia Pacific region. Dr. Wang, an anesthesiologist and business development leader, has over 30 years of experience leading growth-focused sales and marketing teams in the region. Next, we appointed Tim Benno as Chief Marketing and Strategy Officer. Tim has an impressive history of overseeing the launch and commercialization of transformational therapies for leading companies. He joined us from Inari Medical, where he managed global sales, marketing, and market access for their top products. We also brought on Lynette Tore as Executive Vice President of Quality and Regulatory, who has over 20 years of expertise in global quality and regulatory compliance. Finally, we have a new Chief Information Technology Officer, an expert known for driving large-scale digital transformations and developing tech-enabled products for business growth and cybersecurity. These appointments follow the earlier addition of Lisa Helman as Chief Human Resource Officer, who previously led HR at a prominent women's medical technology company. All these leaders are deeply committed to enhancing the patient experience and are highly qualified to guide us into the next phase of growth and innovation. Their presence is a testament to the exceptional talent we already have and our leadership position in the industry, which has enabled us to attract such skilled professionals. With this new structure, we now have the foundational elements in place to enhance commercial and operational excellence as we execute our growth strategy. The responsibilities previously held by our Chief Operating Officer have been redistributed to other roles, including promoting Omar Ahmed to Chief Technology and Innovation Officer. We do not foresee significant further additions to leadership apart from the eventual appointment of a permanent General Counsel. Now, let’s shift to our strategic and financial goals and how we plan to achieve them. We remain focused on investing in our core healthcare business to reach our goals and accelerate long-term revenue growth. I'm enthusiastic about the opportunities we have ahead, and I would like to briefly outline our growth strategy. We are concentrating on three growth waves: elevating commercial excellence, accelerating intelligent monitoring, and innovating wearable technologies. First, regarding elevating commercial excellence, we have added key leaders focusing on commercial execution, including our new Chief Commercial Officer and our new leader in Japan and Asia Pacific. These leaders are committed to driving growth across our portfolio. As discussed in our previous earnings call, we have strategically aligned our U.S. sales team from specialty teams organized by product category to regionally led groups within our pulse oximetry structure. We believe we have the top pulse oximetry sales team in the industry and we aim to leverage their strength in other categories to enhance our market position. Categories such as capnography, brain monitoring, hemodynamics, and automation represent markets valued at $1 billion to $2 billion, growing at a high single-digit rate. Currently, we hold less than a 20% market share in these segments. The new sales team structure enables increased representation in each U.S. region, ensuring each region has a dedicated specialist, which should help us capture more business, ultimately aiming for a large market share similar to what we have in pulse oximetry. In summary, we are using our leadership in pulse oximetry to expand our influence on patients and our presence in other advanced monitoring categories, with the goal of achieving 10% to 20% growth in these adjacent markets. Now let's discuss our second growth wave—accelerating the adoption of intelligent monitoring. In this area, we are focused on upgrading our centers and creating advanced monitors with AI algorithms that will enhance our market share and provide additional value as customers invest in our innovations. Our team has previously developed advanced algorithms for the consumer sector, and we are now applying those innovations to hospital sensors. One example includes our capability to detect cardiac dysfunction like atrial fibrillation using only a pulse oximetry sensor, which allows for earlier identification of distressed patients and swift clinical intervention. Our third growth wave will come from innovating wearable technology over the long term. We are actively assessing significant opportunities to transform patient monitoring globally. We have a solid portfolio of wearable technology and telemonitoring solutions currently in pilot phase. There are numerous unmet patient needs that we can address, bolstered by our strong capabilities and momentum in innovation. This third wave of innovation will contribute to our long-term growth potential. In recent months, I have engaged with our employees and customers worldwide, visiting customers, regional offices, and major manufacturing sites across the United States, Saudi Arabia, Mexicali, Japan, Korea, and Malaysia. I've had the opportunity to meet with over 90% of our exceptional team and have been truly impressed by their dedication to Masimo and the patients we serve, along with their creativity and commitment to innovation. This dedication will drive our ongoing growth, and I have great confidence in the team's ability to execute our strategic growth priorities. On the topic of tariffs, our operations and finance teams have diligently worked to minimize our exposure by implementing effective mitigation measures. I'm very proud of our team, as their efforts have significantly reduced the projected tariff impact, which is now over 50% less than our initial estimates. Micah will provide further details and updated guidance, but I want to highlight that our revised EPS guidance now exceeds our original projections from earlier this year, even before the tariff situation arose. Despite the tariffs, we expect EPS growth of 24% to 30% this year. I extend my gratitude to our entire global team for another outstanding quarter. Our products and technologies continue to benefit millions of patients around the world, and I feel honored to be part of this team. Now, I will hand it over to Micah.

Thank you, Katie, and good afternoon, everyone. I want to begin by expressing how proud I am of our global team for their outstanding efforts this quarter. They successfully managed the challenges of the cybersecurity event, implemented measures that reduced our tariff burden by more than 50%, and continued to deliver strong results, with revenue meeting expectations and EPS growing by 46%. For the second quarter, healthcare revenue was $370 million, up 7.4% on a constant currency basis. Our consumables and service revenue grew 8.4%, and our capital equipment and other revenue declined 2%. As I mentioned earlier this year, we're observing a transition from capital lease to operating lease accounting under ASC 842. This shift created more than a 1 percentage point headwind to our total revenue growth and is the reason for the decrease in capital and other revenues. Notably, revenues are on track to reach our full year guidance as we are seeing more normal seasonality this year compared to last. We also shipped 63,100 technology boards and monitors this quarter, which is within our expected range. Moving down the P&L, our gross margin of 62.9% improved 40 basis points year-over-year driven by 90 basis points of operational improvement, partially offset by 50 basis points of tariff impact. Tariffs increased cost of sales by $2 million this quarter, which is in line with our expectations. Our operating margin of 27.5% improved 600 basis points year-over-year, driven by 650 basis points of operational improvement, partially offset by 50 basis points of tariff impact. The cost structure optimization measures implemented in 2024 are clearly delivering margin benefits. Our non-GAAP earnings per share was $1.33, representing 46% growth versus the prior year. In addition to our improved operating margin, we realized a lower tax rate in the quarter as we are seeing greater profits from outside of the U.S., which carry a lower tax rate. Operating cash flow for the healthcare business was $62 million, which allowed us to repay $38 million in debt and repurchased $14 million worth of common stock. Now moving to our updated fiscal 2025 financial guidance. We are projecting revenue of $1.505 billion to $1.535 billion, which reflects 8% to 11% growth on a constant currency basis. Excluding the impact of new tariffs, our updated guidance implies operating margins of 28.3% to 28.7%, reflecting a year-over-year improvement of 460 to 500 basis points. Further, our updated guidance, excluding tariffs, implies earnings per share of $5.45 to $5.70, reflecting year-over-year growth of 30% to 36%. Including the impact of new tariffs, we are updating our guidance for operating margins to be in the range of 27% to 27.5%, representing an increase of 130 basis points at the midpoint versus prior guidance. This is driven by 25 basis points of operational improvement and 105 basis points of tariff expense reduction versus our prior assumption. Further, we are updating our guidance for earnings per share, including tariffs, to be in the range of $5.20 to $5.45, representing an increase of $0.35 at the midpoint versus prior guidance. This is driven by $0.12 of operational improvement and $0.23 of tariff expense reduction. Our updated guidance now incorporates $17 million to $19 million of tariff impact from new tariffs compared to our prior guidance of $33 million to $37 million. This represents a $17 million reduction in tariffs at the midpoint versus prior guidance, with over 60% of the reduction coming from our intensive efforts to mitigate the impact. Breaking down our updated guidance range assumptions for tariffs, products manufactured in Mexico and not currently eligible for USMCA exemption now represent 2% of our total cost of sales, and we are assuming a 30% tariff rate. Products manufactured in Malaysia that are subject to U.S. tariffs now represent 18% of our total cost of sales, and we are assuming a 19% tariff rate. Patient tables sourced in China represent 4% of our total cost of sales, and we are assuming a 59% tariff rate, which combines the new tariff rate of 34% with the pre-existing Section 301 tariff rate of 25%. We are now including the potential impact of new tariffs on copper. Copper raw materials represent up to 4% of our total cost of sales, and we are assuming a tariff rate of 50%. Although this is still a very fluid situation with all the changes in tariff rates and assumptions, it's important to note that a majority of the improvements in tariffs is being driven by our mitigation actions. These actions involve adjustments to our supply chain as well as an intensive administrative effort to qualify our products for exemption, including those under USMCA. I'd like to take a moment to thank our operations and finance teams for their hard work in implementing these mitigation plans. As shown in our earnings presentation material today, we've already executed a variety of actions that are contributing to more than a 50% reduction in the gross tariff impact we estimated last quarter. We don't view our mitigation efforts as fully complete, and we have already identified additional medium-term mitigation measures to reduce the tariff burden even further over time. Moving on to the cybersecurity-related costs reported last quarter. In the second quarter, we incurred net expenses of approximately $4.5 million to recover and fortify our systems with the help of a team of outside experts. These expenses are excluded from our non-GAAP results as they are nonrecurring in nature and expected to be recovered over time. Finally, the divestiture of Sound United announced last quarter remains on track to close by the end of the year, subject to obtaining necessary regulatory clearances. Regarding the use of proceeds, we anticipate share repurchase will be our priority as we believe that will be more accretive at our current share price. Looking ahead, capital deployment strategies might involve a mix of share buybacks, debt reduction, and tuck-in acquisitions of technologies that enhance our in-hospital monitoring capabilities. And as a reminder, our 2025 financial guidance does not reflect any benefit from the use of proceeds from the sale. In closing, our second quarter results clearly highlight the exceptional earnings power of our healthcare business. Notably, we have more than compensated for the impact of tariffs this year as our revised EPS guidance now exceeds the original projections coming into the year. Our global team has demonstrated consistent execution, successfully navigating challenges such as network outages and new tariffs while still delivering another outstanding quarter. With that, we'll open the call to questions.

Your first question comes from the line of Marie Thibault of BTIG.

I wanted to start here with the guidance update. Nice to see that nudge a bit higher. Micah, if you could tell us a little bit about how you're considering what the inputs into that guidance range? Any details on kind of hospital census, the capital equipment environment, any impact you saw from cybersecurity in the quarter, all the things that went into thinking about that guidance raise?

Thank you, Marie. From the quarter's results, we met our expectations. We're benefiting from foreign exchange this year. We maintain our constant currency growth forecast of 8% to 11% for the year. Our full-year assumptions remain strong, particularly in consumable services. We anticipate capital sales growth in the low single-digit range. These assumptions have remained consistent since the end of last year, and everything is aligning well. We did expect some challenges from the implementation of ASC 842 this year, and it has been as anticipated. Overall, we feel good about our quarter-end results and our trajectory for the year.

And then I guess I wanted to ask a little bit about the sales force alignment and the progress there. I understand it's obviously going to take a little bit of time. But any early feedback that you're seeing from that new structure? And any time lines that we should think about in terms of seeing increased adoption of these advanced parameters?

Yes. So thanks, Marie for the question. I think really for us, having a dedicated specialty sales rep for each pulse oximetry sales territory and really for the major regions across the U.S. is so far, the feedback has been really positive that we're having better follow-through in each of the regions. But because our business is tied to committed contracts and the changes only happen in the middle of the year, it's too early for us right now to quantify changes in the growth outlook or to know exactly when the impact is going to happen. But we would expect to see the impact more into 2026.

Your next question comes from the line of Jason Bednar of Piper Sandler.

I want to start with maybe the status of the relationship with Philips, a big customer and partner of yours in the patient monitoring side. We're pretty deep into what was a 10-year contract that Masimo had with Philips. There was a recent announcement of one of your competitors regarding expanded enhanced partnership with Philips, that's raised some questions from investors just about your own standing with Philips. So just given like kind of a platform today and with that preamble out there, what's the status of Masimo's relationship with Philips? What is the opportunity set for revenue growth within that Philips customer base look like over the next decade relative to the past decade, can Philips still be growth accretive for Masimo?

Jason, yes, thanks for the question. So as you know, the Philips agreement is still in place between Masimo and Philips and over time, obviously, we need to evolve that agreement. Personally, I've been involved in a lot of meetings and conversations with Philips and even though we saw, as you said, a competitive press release about a relationship with Philips, the Masimo relationship with Philips remains very strong. We are in conversations to continue that partnership well into the future, really two major market leaders working together, we see that as really important for us going forward strategically. I personally have known the Philips organization for a long time and have engaged in conversations about a continued partnership. If you look over the last 10 years, to your point, we've seen a significant increase in the Masimo presence inside the Philips installed base. We would anticipate that this should continue.

All right. Perfect. Micah, I have a question for you. You mentioned that there’s still a path ahead for medium-term mitigation to help ease some of the pressures you're experiencing this year due to tariffs. Although it's early, do you have any preliminary thoughts on the annual impact as we look at the $26 million from tariffs, particularly on a net basis? There are many factors to consider, both positive and negative. I know you’re also optimistic about achieving 100 basis points of core margin improvement each year. I'm just trying to ensure we're all aligned as we consider next year, so any insights you can share would be appreciated.

Thank you, Jason. This year, we project a tariff impact of $17 million to $19 million, with some of it affecting us in Q2 and increasing in the latter half of the year. In our earnings presentation today, we've outlined the annualized impact. Initially, without any mitigation, we were looking at challenges of about 390 to 550 basis points. Recent changes in tariff policy and rate assumptions have improved that by around 70 to 100 basis points. The mitigation actions we've implemented thus far have resulted in approximately 120 to 190 basis points of tariff reduction annually. After these actions, we're seeing a tariff impact of around 200 to 260 basis points on our cost of sales. We're actively pursuing medium-term mitigation efforts we've identified, which we estimate could yield an additional 100 to 110 basis points of improvement, reducing the impact by nearly half. Implementing these changes will take time, and we're still assessing all measures, but we're committed to addressing this issue. We've already had success in reducing our exposure, and we are diligently working to continue this trend.

Your next question comes from the line of Michael Polark of Wolfe Research.

I have a question about the true incremental metric disclosed in the presentation. It declined over 20% in the first quarter and appears to be down year-on-year by 40% in the second quarter, with a year-to-date drop of 33%. I'm looking for more insight into why this metric is performing this way and what might lead to improvement moving forward. Specifically, are the changes being made to the sales force impacting bookings performance in the first half, and could these changes provide relief in the second half? Any insights would be appreciated.

So the first half of the year, the incremental value of new contracts is over $155 million. We're on track for another solid year for contracting with a strong pipeline in the second half. As we've talked about this before, it's highly dependent on the timing of large deals that come up for bid throughout each year, and we're still seeing good increases too in other metrics like unrecognized contract revenues, which are up 7% year-over-year. We are, of course, delivering shipments. We saw very strong consumables in the quarter, and we're tracking well. We do have a good pipeline for the second half, and we plan to execute on the full year.

And I guess maybe just only follow-up then is the sales force changes not an influence that you would call out as more deal timing?

Yes, definitely related to deal timing. It's all about when certain contracts come up for bid. That can fluctuate from quarter to quarter, year to year. So we feel we've got a very good pipeline ahead of us, and we're expecting to see very strong results in the back half.

Your next question comes from the line of Rick Wise of Stifel.

To begin, could you provide more insight on the board shipments? It sounds like a strong number. If I recall correctly, you mentioned expectations of 248,000 to 260,000 for the year. Based on the first half numbers, that seems to suggest a slowdown in the second half. How should we interpret this? What are your thoughts on the second half to help us set our expectations?

Yes. So Rick, we're still kind of in that $60,000 to $65,000 range for what we expect per quarter this year. So that's kind of how you should think about it as we move into Q3, which is right in that range. We’ve seen that at just above the midpoint of this range where the upper part of the range for the second quarter.

Yes, Rick, I can just say kind of coming in that board shipments really vary depending on the OEMs, when they're ordering, it's just very seasonal. So it's hard to say that you can get a trend out of just a couple of quarters. I mean it's hard to predict. So I think the overall year is good to bank on.

Yes. Katie, you have made some significant additions and changes, and thank you for clearly outlining these initiatives. Several people have mentioned this, so let me frame it this way. Regarding commercial excellence, the adjacent market share, and the intelligent monitors, how should we approach the incremental improvements that sound promising? When do we really start? When would you expect us to hold you accountable for a possible increase in revenue related to these initiatives?

Yes. Thanks, Rick. Great question. So, as you know, we're going to be holding an investor conference in December of this year. At that time, we'll have a lot more details available about the timing of some of these new products with intelligent monitoring acceleration, etc. So we know sort of the year, but we don't know the exact quarters. At the investor conference, we should be able to give you some clear expectations as we go into next year.

Your next question comes from the line of Vik Chopra of Wells Fargo.

Congrats on a nice quarter. Maybe just a quick question for me is, can you provide an update on your progress with your new hemodynamic monitoring technology? Do you still expect to launch in 2026? Maybe talk about your ability to compete in the market.

Thank you for your question. Regarding hemodynamics, we are set to launch soon. We already have some pilots running with the LiDCO technology we acquired a few years ago, which uses a smart cable connected to our current monitors. What we are discussing is that next year, we will introduce a next-generation monitor featuring advanced technology and improved screens related to hemodynamics. You can expect this to be released in the latter half of next year. We will also continue to utilize the smart cable with our existing monitors to gather detailed feedback from patients and customers. That summarizes our current status. I'm not sure if that completely answers your question, but that is our plan for the latter half of next year with a full product launch and a dedicated team focused on it.

Great. That's helpful. And just a quick follow-up, if I could. Can you just let us know on the cyber attack if you expect any impact in Q3? Are you back to normal operating levels?

Yes. Thank you, Vik. So yes, we're back fully operational. We did provide that update during the quarter, the second quarter. As you saw, we finished right in line with where we were hoping for the quarter. So it was a great recovery by the team. We don't view any material impact on the quarter of the full year and we are fully operational. All systems are running. So manufacturing is up, our order taking is up, and also our ability to ship out of our distribution warehouses. So we're excited. We're very thankful for all the hard work by the global team being able to meet the quarter and get us on track for further.

Yes. I think the only other additional comment is that as we brought our systems back up, as anyone would do, we tried to bring them up in a fortified way. So that we would be stronger to prevent future attacks. We feel really good about that. We've got some amazing expert help to make that happen. It was all within the context of the insurance. It's never great to have a cyber attack, but I think it really helps us get stronger as an organization.

Your next question comes from the line of Matt Taylor of Jefferies.

I just wanted to ask you about any change in competitive dynamics? Your main competitor did call out on their last earnings call pressures from generics and reprocessing, and I was wondering if you saw any of that increasing out in the marketplace?

Yes. Thanks for the question. What we would say is that we have not experienced the same pressure. There's always reprocessed sensors out there in the marketplace. We did not see it have a significant impact on us in the quarter, and we just haven't seen as much of an increase as we've seen as the competition was mentioning.

And maybe one follow-up. So could you give us any color on some of the product lines outside of pulse oximetry, things like rainbow, capnography, and O3? Any broad strokes in terms of how those are doing or anything new there?

Yes. Thank you, Matt. Yes. We'll give more of a comprehensive update at the end of the year. But right now, what we've seen year-to-date, we're tracking very well on our growth rates there across our advanced primary category. Rainbow is tracking well. We're seeing good strong growth from capnography and brain monitoring, and they're in line with our long-range target growth rates for those categories.

Your next question comes from the line of Mike Matson of Needham.

Yes. A few, I guess, for Micah. So the third-quarter seasonality looks like consensus has got you sort of about flat, about $370 million. I know you don't give quarterly guidance, but just any color you can provide there in terms of what we should be expecting sequentially would be helpful.

Yes. If you remember, during the last earnings call, I mentioned that as we approach the end of the year with our guidance, we anticipate normal seasonal patterns this year. Last year deviated from the norm as we experienced growth in hospital admissions during the second and third quarters. This year, we are observing more typical seasonal behavior from our business, making it somewhat easier to predict. Based on that, we expected revenues to decline in the second quarter and decline further in the third quarter, followed by a strong fourth quarter. That's how we see the year progressing. It's also worth noting that we have an extra week of revenue in the fourth quarter, so adjusting for that is the best way to assess the situation. We are aligning with the normal seasonal trends we outlined for the year.

I understand. You slightly increased the revenue guidance by about $5 million, but the constant currency growth remains unchanged. The dollar has depreciated significantly. Can you discuss whether you're hedging on the top line and what you anticipate regarding the currency's impact on both revenue and earnings per share for the year?

Absolutely. We're maintaining a range of 8% to 11% constant currency growth and are basically benefiting from more favorable exchange rates on our reported revenue. So that’s how we’re thinking about the guide. So we raised the reported revenues by $5 million at both ends of the range and held our constant currency guidance.

Okay. So what's the net currency benefit, I guess, to revenue? Is that the $5 million?

It's $5 million, yes. That's how we're seeing it play out.

There are no further questions at this time. And with that, I will turn the call back to Katie Szyman for closing remarks.

Operator, I think we may still have one more question in the queue. Can you double-check that, please?

Our next question comes from Jayson Bedford of Raymond James.

Thanks, Eli. I owe you a drink for that. So, I have a few follow-up questions. Katie, you mentioned the goal to improve market share in advanced markets compared to capnography and brain monitoring. Which of these markets do you believe offers the greatest chance for gaining share? Can you achieve this with just more focus from the sales team, or is a new product narrative necessary to support these expected market share increases?

Yes. Thanks for the question. Great question. We would say that we have fantastic technologies. Over the last 5 to 7 years, we've acquired some great technologies in those spaces. I would say it's a combination of having better sales force focus and alignment. Additionally, you'll start to see us come out with some next-gen sensors that will play into those spaces as well as the next-gen monitors that will come out in the next couple of years that will help to supplement that. It's not going to be like overnight, but you'll see it kind of gradually increasing. We do believe that we have fantastic technology in that category. It's just that we kind of came later into those markets. We don't have as much of a second installed base across the board, especially with some of the OEM manufacturers' presence. That's another thing that we're kind of working on as well. If you look at the surrounding space, we're pretty excited. The way that we sort of lifted those adjacent markets would be kind of our order of excitement.

Okay. That's helpful. Micah, somewhat related to an earlier question. Just unrecognized contract revenue, it looks like it was down sequentially for the second straight quarter. I guess the easy question is why. But is there a timing dynamic as well tied to that?

Yes, there is. We saw the consumable revenues up about 60% sequentially in Q1 and Q2, which we expected. That was all tied to recognizing revenue on a large OUS tender. So we're seeing the mix of the sub-capital kind of normalizing in Q2, and that's what that is. It's recognizing revenue on that contract. So that was a big positive for us this quarter.

Okay. And then last question, somewhat interesting. Lower tax rate in Q2, I haven't gone through all of the guidance here, but what is the assumed tax rate for the year tied to the EPS guidance?

Yes. So for the full year, at the midpoint of our guidance range, we're around 23.8%.

There are no further questions at this time. I will now turn the call back to Katie Szyman for closing remarks. Please go ahead.

So first of all, thanks to everybody for joining the call today and for your interest in Masimo. We look forward to joining you again on our next earnings call next quarter. Thanks, everyone.

Ladies and gentlemen, this concludes today's conference call. We thank you for participating and ask that you please disconnect your lines.